It's a busy week for economic reports as well as a busy week for political scandals.
Time to trade the news, right? And maybe even trade your politics?
Wrong. And wrong again.
Sure, stocks can move sharply up or down, depending on the economic report of the day. But do you recall whether one particular economic report determined your financial future? I sure can't, and I am certain most people can't. I'm not talking about some trade that went north or south based on jobs numbers. I'm talking about your ability to retire, or achieve other financial goals.
I've been working in the business media for years, and let me share a little secret: The machine needs to be fed. It needs new stuff to tell you every day. What if your favorite business news channel said: "The GDP number is interesting, in a geeky kind of way for those who enjoy tracking the economy on a month-to-month basis. But as far as your portfolio? Doesn't make a difference. So we have nothing more to say in this hour."
Heads would roll.
Instead, you hear breathless coverage from various trading floors, augmented by a parade of pundits in expensive suits who join the programming from far-flung locales, to expound on why it really does matter to you. Then the promo between segments asks, "How should you play the GDP report?" Or whatever report they are hyping that day.
I'm offended by the news media that encourages people to "play" these events like it's all part of some casino game. Remember that those anchors are not allowed to trade these stocks, and it's likely that their investments are sitting in conservative or moderate portfolios. Not playing any games based on news events or economic reports, but just allowing the magic of compounding to boost their net worth.
Meanwhile, they are exhorting you to "play," because that makes for more exciting television. Keep that in mind.
But you can't blame the media for all the adrenalin-fueled trading. There are other factors. I worked for William O'Neil of Investors Business Daily for many years. While my personal investing philosophy has evolved beyond those trading methods, I still agree with much of O'Neil's market outlook. For example, he brought home the idea that one's opinions should not drive investing decisions.
Think the economy is in the tank? Sell everything! Well, if you had done that, you would have missed out on big gains in recent months and years.
Think Obama is going to knock on your door and confiscate all your money? This one is particularly galling to me. I've been asked by numerous political conservatives whether they should stash all their money under the mattress to protect it from a confiscatory government.
That would have worked out well, wouldn't it? I say that as a person who voted against Obama twice. But the idea that any minute that he will make a sudden move that will crash the market? It's delusional. Political conservatives who hide in cash, based on these fears, have only hurt themselves. They haven't stuck it to Obama in any way, shape or form.
I know, I know. People will say, "it hasn't happened yet! Just wait!" But market history is on my side. Just don't trade or invest based on fear or political opinion. It isn't a sound way to build wealth.
Put opinions aside. Put economic reports aside. Put politics aside. Focus on accumulating financial assets to offset future liabilities. "Playing" the day's news or your opinions is, by definition, keeping a short-term focus that serves only a few individuals.